Chapter 5 - How Ford dodged a bailout, so far

http://www.thestar.com/Business/article/594873

Summary

The media report that I am blogging about is how Ford dodged a bailout, so far. Alan Mulally, who is the CEO of Ford, has his names in the headlines but it is less than his competition in General Motors Corp. and Chrysler LLC. Mulally isn’t in the spotlight because unlike GM and Chrysler, he isn’t looking for a tax-payer bailout to stay out of Bankruptcy at his Ford Motor Co. Ford lost $14.6 billion (U.S.) last year. Ford has the strongest balance sheet because of their $13.4 billion (U.S.) in its treasury but they also have $26 billion (U.S.) of debt. Ford only has $13.4 billion (U.S.) in cash reserves and that won’t get them through the next 2 years. In last year’s fourth quarter, Ford had $5.5 billion (U.S.) in losses. Alan Mulally dodged a bailout because he had used his money bracing an economic downturn in which did occur. So basically, Ford had taken huge shots to their cash department but followed through with their strategy that kept them out of a bailout, at least for now.

Connections

This article connects to chapter 5 because chapter 5 talks a whole lot about Cash. See, the chapter talks about the importance of cash and cash flow management to a company’s financial health. As if you can see, Ford had managed their cash in an excellent way, because so far, this has allowed them to dodge a bailout and even though their cash took huge shots, they are still capable of following through with their strategy of staying green. How ford dodged a bailout also connects with the concept of understanding the importance of cash by means of not letting the tax payers bail you out. They had a solid plan B with their backup cash that can last them for the next 2 years.

Personal Reflection

I believe that Mulally is a very smart Business man and he did good. Ford actually showed that they are about the potential investors/buyers because the back-up cash that Ford has shows to the buyer/investor that they are reliable and don’t need a tax-payer bailout as Option B. Unlike other rival companies, Ford showed that they could follow through with their strategy rather than crumbling down and requesting a tax-payer bailout. I think that Ford showed that they understand the importance of cash by the way they had kept a nice amount of money kept back bracing an economic downturn. So basically, I agree with what Ford has done and I believe it will help them out in the future because potential buyers would take this into consideration before investing during these tough economic times.

Mandeep Dhami
Financial Accounting 12
Block A